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Eurozone consumer prices rose 5.3% year-on-year in August, keeping pace with the previous month and beating economists’ expectations for a slowing economy, according to reports. initial estimate According to the Statistics Office of the European Union.
Inflation has slowed significantly from a peak of over 10% in October, but there are signs that some inflationary pressures will persist despite the weaker economy in the region. Food inflation was once again the biggest driver of headline interest rates, rising 9.8% year-on-year on average across the 20 countries that use the euro currency.
Energy costs also rose 3.2% month-on-month in August, giving inflation some upward momentum.
Core inflation, which excludes food and energy prices, used as a measure of domestic price pressures, eased to 5.3% from 5.5% in July.
By country: Rising energy prices are increasing inflationary pressures in the region’s largest economies.
Recovery in energy prices offset slowing food inflation in some of the eurozone’s largest economies. This month, annual inflation accelerated to 5.7% in France and 2.4% in Spain.
In Spain, inflation dipped below the European Central Bank’s 2% target in June before rising again to above that level.
Inflation in Germany, Europe’s largest economy, slowed to 6.4% in August, only marginally lower than the previous month, as household energy and car fuel costs rose.
What’s next: The European Central Bank is considering further interest rate hikes.
Inflation picking up in some of the region’s largest economies comes two weeks before the European Central Bank’s next policy meeting. The question as analysts analyze the data is whether the report will matter enough to persuade policymakers to raise rates again at their mid-September meeting. The central bank has raised rates by 4.25 percentage points nine times in a row in about a year, adding to growing evidence that higher interest rates are holding back the economy, especially with declining lending.
Last month, central bank governor Christine Lagarde said she and her colleagues were “open-minded” about decisions made at meetings in September and later. Policymakers are trying to strike a balance between raising rates just enough to quell high inflation and not causing unnecessary economic pain.
“It might raise rates, it might keep them on hold,” Lagarde said. “And what is decided in September is not final. It may vary from meeting to meeting.”
“Underlying price pressures remain high and domestic factors are now the main driver of eurozone inflation,” said central bank member Isabelle Schnabel ahead of the release of eurozone data on Thursday. there is,” he said. It added that this meant a “sufficiently restrictive” policy stance would be needed to bring inflation back to the central bank’s 2% target “in a timely manner.”